Draft Heads of Terms Option and Lease for [ ] Community Wind Scheme Page 1 of

Draft Heads of Terms Option and Lease for [ ] Community Wind Scheme Page 1 of These Heads of Terms are applicable only to Community Wind Schemes approved under the National Forest Land Scheme. These are not applicable to any other schemes on the National Forest Estate. Landowner The Scottish Ministers c/o Forestry Commission Scotland Developer [ ] Option Subjects [Part of [ ] Forest Block located [ ] as shown delineated on the Option Plan. Access to the Option Subjects is via the Access Route shown in blue on the Option Plan.] The Option Plan is to definitively depict the Option Subjects to scale. Term Option Agreement Permitted Use Option Agreement 3 Years from the last date of signing the Option Agreement. The investigation into the viability of and thereafter design and planning of a [ ] MW windfarm. The full scope of site survey and investigation work is to be agreed with the Landowner prior to any activities taking place on site. The Landowner is to approve the windfarm design in so far as it affects the Option Subjects prior to the Developer submitting the Planning Application ( Approved Planning Application ). The Developer must incorporate any design features that the Landowner might reasonably require to enable continuation of the Landowner s activities. Such features might include, but are not limited to, crossing points over cables and permanent markers showing the route of the cables. Option Notice Lease Subjects Term - Lease Date of Entry Consideration The Developer may exercise their Option by serving an Option Notice only once planning permission has been obtained provided that the planning permission is not inconsistent with the Approved Planning Application. The sites of the wind turbine bases, control building and electricity grid substation are to be leased in so far as they belong to the Landowner, with non-exclusive access rights thereto. The location of all above to be shown on the Lease Plan. 28 years from the Date of Entry Upon termination of the Lease by whatever means and on whatever date, the Landowner will be entitled to vacant possession of the Lease Subjects. Lease: 28 days form the serving of a valid Option Notice. Rent will be based on a percentage of Gross Revenue. The actual percentage will be determined by reference to the Forest Renewables Rent Model. Gross Revenue 1

Gross Revenue is the aggregate income received by the Developer from the sale of electricity generated from the Lease Subjects and includes: payments received in relation to Levy Exemption Certificates, Renewable Obligation Certificates and/or Feed In Tariffs any embedded benefits and any subsequent variation to the aforementioned or new generating incentives that may materialise during the Term. Gross Revenue also includes any payment or subsidy received in consideration for the Developer not generating electricity. References to index linked are to increases in the RPI (or any replacement index if RPI no longer exists) only. For the avoidance of doubt, no decrease in the RPI shall be taken into account when calculating consideration due such that no decrease in the RPI shall result in a reduction in the amount of any index linked sum. Late Payment Permitted Use In the event of late payment of any compensation, fees or rents or other payments, interest shall be payable at 4% above the base rate set by the Bank of England. The construction, operation, maintenance and repair of wind turbines with a maximum generating capacity of [XX] MW along with associated control building, electricity cables, grid connection point, access tracks and other infrastructure necessary for the production and commercial exportation of electricity from the lease area and the subsequent decommissioning and removal of those turbines and above ground infrastructure. All in accordance with prior methods of working (see also Health & Safety below) to be agreed in writing to the Landowner s reasonable satisfaction: The Landowner s prior written approval must be sought for any proposed changes to the agreed design of the scheme; such approval not to be unreasonably withheld or delayed. Failure to seek such approval will be deemed to be a breach of the Lease. All construction and operation must be in accordance with prior methods of working (see also Health & Safety below) to be agreed in writing to the Landowner s reasonable satisfaction. The Developer will have the right to make an application to the Landowner for the right to win aggregates for use in construction of the windfarm. The Landowner will act reasonably when determining such an application. A successful application will have a royalty rate set by the Landowner and any such workings are to be managed by the Developer in accordance with the relevant Quarry Regulations. Access The Landowner will reserve a right of access to the Lease Subjects at all times, but this right will be exercised in such a way as to not interfere in the Developer s activities. Following completion of construction, the Developer must give the Landowner prior written notice if major items of work are to be undertaken on the Lease Subjects. Where the Developer s access to the Lease Subjects is impeded as a result of snow, the Developer will be solely responsible for snow clearance to allow unimpeded access but the Developer will be under no obligation to clear the snow. Under no circumstances will any salt 2

or salt based treatments be used on the Access Roads. Felling Felling will be undertaken only where reasonably necessary for the development of the windfarm. The extent of any such felling will be agreed with the Landowner prior to any work taking place on the subjects. The Landowner may require a greater area to be felled to ensure workable areas and wind firm edges. The Landowner will either undertake the felling themselves or require that the Developer does the work using a suitable competent and qualified forestry contractor. All costs of felling will be borne by the Developer including the payment of timber compensation rates, which will be as per the Landowner s standard table of compensation. Restocking Payment In addition to the above compensation, the Lease Subjects are to be restocked by the Landowner to the maximum extent possible. The arrangements for restocking are to be agreed by the Landowner acting reasonably. The costs of restocking are to be borne by the Developer. Where restocking is not possible then the Landowner reserves the right at their sole discretion to require that compensatory planting is undertaken in accordance with the Scottish Government Woodland Removal Policy and at the Developer s sole expense covering an area equivalent to that or those felled. For the avoidance of doubt, the Landowner reserves the right to require compensatory planting to be undertaken where it is not a requirement of the Planning Authority. Any compensatory planting is to be undertaken within a timeframe intimated by the Landowner. Maintenance The maintenance of any access roads will be at the Developer s sole expense during the wind farm s construction stage. Throughout this period, the Developer will ensure that any access roads used remain open and in a suitable condition for all usual forestry purposes including use of harvest and timber support vehicles. Where new roads require to be built or existing roads upgraded then the Developer will have the right at their sole expense to do so to the Landowner s road specification. Where this not possible then during the construction phase the Developer will have the rights to upgrade or construct roads to a higher standard but such roads must be restored to the Landowner s specification post construction. After the construction phase, maintenance of the access roads will be according to use. The Landowner will not be obliged to maintain any access roads beyond the standard they reasonably consider necessary for their own purposes. Any additional maintenance costs required to keep the road to a higher standard will be met by the Developer throughout the Term of the Lease. Any damage caused to any of the Landowner s property (including for example, access roads, drainage systems, bridges, fences, ditches, walls) during the windfarm s construction (including any associated felling operations) will be repaired at the Developer s sole expense as soon as is reasonably practicable and to the Landowner s reasonable 3

satisfaction. The Developer will not obstruct any forest roads in the construction or operation of the windfarm scheme except by prior agreement with the Landowner. The Developer is to provide a photographic Record of Conditions to the Landowner prior to work commencing on site. Consents or Felling Licence If the Developer is unable to comply with the Forest Design Plan then if the Developer is required to carry out the felling, the Developer will at their own expense, obtain any planning and other permissions, licences and consents necessary to enable the Developer to carry out the required felling. The Landowner will comply with any reasonable felling licence, planning or S.75 conditions imposed over the Lease Subjects, but will not for the avoidance of doubt be obliged to undertake any felling or any other management practices. Windblown timber In the event that windblown timber lands on or partly on the Lease Subjects, the Developer will have the right to clear the timber immediately without having to notify the Landowner. However, in the event that such timber lands outwith the Lease Subjects and is having an adverse impact on the safe operation of the windfarm, the Developer will have to notify the Landowner as soon as reasonably practicable. The Landowner reserves the rights to such timber and will notify the Developer of the timescale for clearing it. Should the Landowner notify the Developer that they do not wish to clear the timber then the Developer will have the right to do so, but must provide a risk assessment, method statement and evidence of a competent operator with appropriate insurance prior to commencement of the clearance of such timber. For the avoidance of doubt, the Landowner will not be liable for any damage caused by windblown trees. Statutory Compliance The Developer is to comply with all obligations imposed on them or their use of the Lease Subjects by all legislation from time to time in force. The Developer will also comply with all requirements imposed on them by statutory bodies, such as the Scottish Environmental Protection Agency, throughout the Term. The Developer shall also comply with all planning permission(s) and the whole terms and conditions thereof and to relieve the Landowner from and against all costs, expenses and demands suffered by the Landowner as result of any losses, obligations or conditions imposed upon the Landowner in terms of the aforementioned planning consent. The Landowner on request by the Developer will provide copies of any existing planning permissions. Rates and Taxes Indemnity The Developer is to pay all rates and taxes and other outgoings in relation to the Lease Subjects. In particular, the Developer shall be fully responsible for payment of any Stamp Duty Land Tax chargeable in respect of the Lease. The Developer will free, relieve and fully indemnify the Landowner 4

throughout the term of the Lease against all losses, claims, costs, liabilities, or proceedings as a result of any damage to the Landowner s (or any third party s) property or any accident, injury or death involving any person, whether employed or contracted by the Developer or Landowner or a member of the public, as a result of the Developer s occupation and use of the Lease Subjects. The Landowner will not be responsible for any damage to the Developer s infrastructure associated with the windfarm as a result of their normal forestry and estate management operations including road maintenance, haulage and harvesting operations, where the Developer has failed to fulfil their obligations under the Lease. If during construction or operation of the windfarm, the Developer (or any party employed, contracted or otherwise invited or permitted entry thereby) causes a fire to start, the Developer will indemnify the Landowner against any damage or financial harm this fire (or any other fire attributable to this one) causes, no matter how remote. The Developer is to maintain public liability insurance for not less than 5 million index linked during the Option Period and suitable run off cover thereafter, and 10 million for the duration of the Lease. This figure is to be Index linked and increased on each fifth anniversary of the Date of Entry of the Lease. For the avoidance of doubt, the liability of the Developer is not limited to the amount of the public liability insurance which is maintained. Dispute Resolution / Arbitration If any dispute arising under the Lease has not been resolved between the parties within three weeks of the matter coming to light, both parties shall have recourse to Alternative Dispute Resolution in the first instance. Should that fail to resolve the matter then reference can be made to an Arbitrator who shall be an expert in the relevant field of dispute. The appointment of an Arbitrator is to be mutually agreed by both parties. If the parties fail to reach an agreement, the Arbitrator is to be appointed by the Royal Institution of Chartered Surveyors in Scotland. The Arbitrator s determination shall be binding on both parties and any compensation held due shall be paid within four weeks of the determination. If works are required, such works shall be carried out within four weeks of either (1) both parties successfully agreeing upon such works or (2) from the date of the Arbitrator s determination. Lease Extension Break Clause No later than 12 months prior to the date of expiry of the Lease, the Developer may make an application to the Landowner to extend the Lease. The Landowner will act reasonably when considering any such application, but any extension granted will be subject to terms which are to be agreed at the time. From and after the tenth anniversary of the Date of Entry, the Developer may terminate the Lease by giving the Landowner at least 12 months written notice. This only applies if (1) the windfarm is, within the reasonable view of the Landowner, permanently non operational by the termination date and (2) a restoration programme has been approved by the Planning Authority and is compliant with their conditions (proof to this effect to be issued along with the Termination Notice). 5

The Landowner may terminate the Lease where the Developer is in breach of their obligations and where a reasonable length of time to comply with them has been given as determined by the Landowner acting reasonably. Health & Safety The Developer is to agree to all Health & Safety lease terms proposed by the Landowner (the standard HAS option & lease terms). The Developer must attend a pre commencement meeting with the Landowner s representative prior to any work commencing on site. The Lease Subjects shall be kept, in line with best practice, in a safe condition so as to prevent damage or injury occurring to persons, animals or property. The Developer is to provide the Landowner with as-built plans relative to the windfarm in a format to be agreed. Prevention of Pollution The Developer will prevent all pollution from occurring to the Lease Subjects and any downstream water body during construction, operation and decommissioning. Details of all hazardous substances and materials to be brought on to the Lease Subjects are to be provided to the Landowner in advance. The Landowner reserves the right to refuse to allow any such substances or materials to be taken onto the Lease Subjects. Any such substances or materials brought onto the Lease Subjects are to be stored in line with industry best practice. Legal Fees The Developer will be solely liable for all of their legal fees howsoever incurred. The Landowner will meet their own legal costs up to a defined limit of 5,000 (exclusive of VAT and outlays); thereafter the Developer will be liable for any site specific legal fees that exceed that limit. Other Professional Fees The Developer will be solely liable for all of their other professional fees howsoever incurred. The Landowner will meet their own other professional fees up to a defined limit of 5,000 (exclusive of VAT and outlays); thereafter the Developer will be liable for any site specific other professional fees that exceed that limit. Forestry Liaison Staff The Landowner will provide up to 160 hours of FCS staff time on a non-chargeable basis (1) for the period of three years from the signing of the Option Agreement ( Agreement Date ) or (2) if the date of commissioning of the windfarm occurs within three years from the Agreement Date, for the period from the Agreement Date to the date of commissioning of the windfarm. After this, FCS staff time input may need to be limited and the Developer will be liable for all costs of any additional time required during the planning, construction and decommissioning phases of the project. Alienation The Developer shall be prohibited from assigning or sub-letting the Lease Subjects either in whole or in part without the prior written consent of the Landowner, which consent shall not be unreasonably 6

withheld or delayed and whose decision shall be final. The Landowner reserves the right to refuse consent in the event that the proposed assignee or sub-tenant does not meet (i) the aims and objectives of the Tenant s Memorandum and Articles of Association or similar, (ii) any of the Application Criteria, and/or (iii) community interests as judged by the Landowner whose judgement shall be final. For the avoidance of doubt the above two paragraphs shall apply equally to assignations and sub-letting or similar for renewable energy projects proposed over the Lease Subjects either in whole or in part, including any Agreements or in-principle approvals relating thereto. The Tenant shall not change or alter in any way the following without the prior written consent of the Landowner, which consent will not be unreasonably withheld; their Memorandum and Articles of Association; any other Constitutional Documents; or the legal composition of the Tenant. Consideration Review Decommissioning There are to be no rent review provisions. On termination of the Lease, the Developer is to be responsible for the decommissioning of the windfarm within 12 months. This will involve: 1) removing all surface structures; 2) if required by the landlord, breaking all concrete out to 1 metre below the surface; 3) making good all surface damage; 4) If required by the landlord removing underground electricity cables. 5) finally leaving the site in a safe and presentable condition to the reasonable satisfaction of the Landowner. Any contaminated land must be cleaned up by the Developer and the site left in a safe and presentable condition to the reasonable satisfaction of the Landowner. The Landowner may, at their sole discretion, require that decommissioning does not occur and may continue to operate the windfarm after termination of the Lease. Restoration A restoration bond for an initial sum of ([ x] pounds sterling) per MW installed will be delivered prior to the Date of Entry under the Lease and will be maintained and will be reviewed on a five yearly basis by an expert whose determination will be binding upon the Developer. The expert will be chosen by agreement between the parties failing which by the Royal Institution of Chartered Surveyors in Scotland. The Bond is to be maintained throughout the lease term. The Landowner would be prepared to consider a restoration account as an alternative. Dissolution The Application Criteria shall include provision that the Tenant has Memorandum and Articles of Association (or similar), and that such adequately provides for the immediate ending of this Lease in the event the company of the Tenant is dissolved, wound up or similar. 7

The Lease shall come to an end with immediate effect in the event of the Tenant being dissolved, wound up or similar. Management Plan Framework On request of the Landowner, the Landowner and Developer will agree management plans to cover each discrete stage of the project. Such plans will set out both parties respective responsibilities in respect of the management of the Lease Subjects. No works will be permitted until the Landowner is satisfied that the Management Plans have been completed to their reasonable satisfaction and that the Plan s stipulations have been adhered to by the Developer. Restriction of Landowner s use of the Subjects The Landowner must obtain the Developer s consent before granting any new rights over the Lease Subjects to third parties. The Developer s consent will not be unreasonably withheld or delayed provided there will be no material interference with the Developer s rights or the operation of the windfarm. The Landowner is not to carry out activities on the Lease Subjects that would materially interfere with the Developer s rights or the operation of the windfarm. For the avoidance of doubt normal forestry operations shall not constitute a material interference. Freedom of Information Disclaimer The Developer acknowledges that the Landowner is subject to the Freedom of Information Act 2000 and the Freedom of Information (Scotland) Act 2002 and the Environmental Information (Scotland) Regulations 2004 and must assist and co-operate with Forestry Commission Scotland to enable it to comply with these information disclosure requirements. The Landowner does not warrant in any way that the subjects are fit for the Developer s intended use. The Developer must satisfy themselves that the Lease Subjects are fit for purpose. The Heads of Terms do not in themselves form all the terms that are to be included within the Option Agreement and the Lease nor do the Heads of Terms constitute a consent between the Landowner and the Developer. 8